Apple launches iPhone trade-in program to shore up sales growth

Apple’s stock has fallen by nearly a third over the last year, partly because it seems that everybody who can afford it already has an iPhone. But with the next model set for release on September 10, Apple is trying to entice users to sell their iPhones back to the company for a discount on a new iPhone.

Tenae Harris got her new iPhone by trading in her niece’s older model when the program began last week.

“My kids have iphones, you know, and most of the young people in my family,” she says. “So they said, you know, ‘Auntie, you need to go ahead and have an iPhone.’”

But people who already have iPhones have been slower to buy the latest models.

“Regardless of what the 5S will look like, it’s not going to be as revolutionary as the first iPhone,” says Israel Ganot, founder and CEO of the website Gazelle. Gazelle buys and re-sells used, high-end smartphones. “As innovation starts to slow down,” Ganot says, “Apple has to find other reasons to get their customers to upgrade on a regular basis.”

Overseas, Apple has a different reason to make its iPhones cheaper. Telecoms analyst Roger Entner says, “Apple is losing out, especially in emerging markets, to lower-priced Android devices.”

Worldwide, three out of every four smart phones run Google’s Android operating system. In some places, Android-powered phones cost as little as $15. Still, the re-sale market for used high-end smart phones is growing too.

“You’re talking about billions of consumers that are going to transition into smart phones over the next few years,” Ganot says. “There is a significant proportion of the market that would like to buy a full-featured iPhone. But since they cannot afford to buy the latest device, they will be as happy buying last year’s model at a deep discount.”

In spite of demand for secondhand devices abroad, in the US, only 15 percent of consumers trade-in their old smart phones, and Ganot says Apple’s trade-in program could change that. “The opportunity in re-commerce is driven by changing consumer behavior,” he says.

According to Jason Gurnick, a manager at Spring St. Mac in Los Angeles, trade-ins also allow Apple to profit twice off of the same parts. Spring St. Mac has re-furbished and re-sold Apple devices itself since the store opened, and Gurnick sees Apple’s new program as an effort to consolidate control over its own parts.

“They’re essentially double-dipping on their own manufacturing process,” Gurnick says. “These parts will go back into their supply chain, whether it’s for defective products that are out there, or refurbished products that they’ll sell, and they will also sell those at a profit.”